Hello, everyone, and thank you for joining the Q1 2022 Albemarle Corporation Earning Conference Call. My name is Terrence, and I'll be moderating your call today. Before I hand over to your host Meredith Bandy. [Operator Instructions]. I now have the pleasure of handing you over to Meredith Bandy, Vice President of Investor Relations and Sustainability. Please go ahead, Meredith.

All right. Thank you, and welcome, everyone, to Albemarle's First Quarter 2022 Earnings Conference Call. Our earnings were released after the close of market yesterday, and you'll find the press release and earnings presentation posted on our website under the Investors section at albemarle.com. Joining me on the call today are Kent Masters, our Chief Executive Officer; Scott Tozier, Chief Financial Officer; Raphael Crawford, President, Catalyst; Netha Johnson, President, Bromine; and Eric Norris, President, Lithium. As a reminder, some of the statements made during this call, including our outlook, guidance, expected company performance and timing of the expansion projects may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation, that same language applies to this call. Please also note that some of our comments today refer to non-GAAP financial measures. A reconciliation to GAAP financial measures can be found in our earnings release and the appendix of our earnings presentation. And now I’ll turn the call over to Kent.

Thanks, Meredith, and thank you all for joining us today. On today's call, I will highlight our results and achievements during the recent quarter. Scott will provide more details on our financial results, outlook and balance sheet. I will then close our prepared remarks with an update on our growth projects and sustainability before opening the call for questions. Albemarle's leadership positions in lithium and bromine and our team's ability to execute have enabled us to generate increasingly strong results. In the first quarter, we generated net sales of $1.1 billion, up 44% compared to prior year. And that's excluding Fine Chemistry Services in the comparison, which we sold in June of last year. This fundamental strength allowed us to more than double our EBITDA year-over-year. The supply/demand balance remains tight in the markets we serve. This has enabled us to significantly increase our 2022 outlook based on continued pricing strength in our lithium and bromine businesses. Scott will dive into the key elements of that outlook later in today's presentation. In terms of operational highlights for the quarter, the restart of our Wodgina lithium mine in our MARBL joint venture is progressing well. First, spodumene concentrate from Train 1 is expected in May. We've agreed with our partners to accelerate the restart of Train 2 with the first spodumene concentrate from that train lie. Together, these two trains can feed conversion assets with annual capacity of around 70,000 tons of lithium hydroxide. Now I'll turn the call over to Scott to walk through our financials.

Thanks, Kent, and good morning, everyone. I'll begin on Slide 5. During the quarter, we generated net sales of $1.1 billion, a year-over-year increase of 36%, including the FCS business, which we sold in June last year. This is due primarily to increased pricing as well as higher volumes driven by strong demand from diverse end markets, especially for our lithium and bromine businesses. For the first quarter, net income attributable to Albemarle was $253 million, up $158 million from the prior year because of the strong net sales, partially offset by inflationary cost pressures. This includes the impact of natural gas prices in Europe on our catalyst business. Adjusted diluted EPS for the first quarter was $2.38. The primary adjustments to earnings were $0.07 add-back for a loss on property sales and a $0.19 add-back for tax-related items. On Slide 6, I'll walk you through our first quarter adjusted EBITDA. For the first quarter, our adjusted EBITDA was $432 million, up 107% year-over-year. The primary driver [Technical difficulty] pricing, driven by the move to index referenced variable price contracts and higher market pricing. Lithium also benefited from the sales of lower-cost inventories, including a one-time sale of spodumene stockpiled during the initial start-up of Wodgina. Bromine was also favorable year-over-year, reflecting higher pricing driven by tight market conditions and a slight uptick in volumes that was partially offset by raw material and freight inflation. Catalyst was down relative to the prior year, primarily driven by higher raw material costs and lower volumes. That was partially offset by pricing. And lastly, corporate expense and foreign exchange were mostly flat year-over-year. Moving to Slide 7. We have meaningfully increased our 2022 outlook primarily to reflect continued strength in our lithium business. I'll discuss our lithium outlook in greater detail in just…

Thanks, Scott. First, let's look at a few of our expansions in Asia Pacific. Albemarle was focused on expanding global lithium conversion capacity to leverage our low-cost resource base. The acquisition of the Qinzhou conversion facility is now expected to close in the second half of this year as we continue to work through regulatory approvals. We look forward to closing this transaction to bring an additional 25,000 tons of lithium to the market. The commissioning process at Kemerton 1 is progressing well. We have introduced spodumene into the process, and we expect to achieve first product by the end of the month. Kemerton II remains on track for mechanical completion later this year. At our China greenfield expansions, we have broken ground at Meishan to construct a 50,000 ton per year hydroxide conversion facility. There are also options to expand that facility. The second China greenfield project at Zhangjiaghang is currently in the engineering phase, and we are looking at options to produce either carbonate or hydroxide. Importantly with our ownership stakes at Wodgina and Greenbushes lithium mines, we already have access to low cost spodumene to feed these conversion facilities. As I mentioned previously, the restart of the Wodgina lithium mine by our JV partner Mineral Resources, is going well and we continue to negotiate agreements to expand and restructure the MARBL the joint venture. And we'll update the market when we have more information. We also have a 49% stake at Greenbushes, one of the highest quality lithium resources in the world. The Talison joint venture is ramping up CGP2 and has approved construction of CGP3 and that's expected to begin later this year. In addition, construction of the tailings retreatment plant was completed during the quarter and commissioning is progressing to plan. Our intention is to…

[Operator Instructions] Our first question comes from P.J. Juvekar from Citi. Please go ahead, P.J.

Yes, good morning. Good pricing initiatives. Given that your leverage is down substantially, it's a real advantage for you right now. Would you consider more M&A in lithium or getting into recycling? Or potentially going downstream? How would you view those options from a 60,000-foot view?

So PJ, I think I mean, we've always we're looking at M&A on a regular basis, I don’t think really our view has changed. So we do want to be in recycling. And we feel like we have a plan. We're working toward being in the recycling business. We look at resources on a regular basis for acquisition, and we look at conversion assets as well. So our strategy has not changed. We may have a little more firepower now than we did in the past. But I think the strategy is [Technical Difficulty] the same areas and we're pretty focused on those areas.

Also in Argentina, in Antofalla what are the permits or hurdles that are remaining before you proceed? And similar for Kings Mountain, what could be some environmental concerns there, which has impacted other projects in the region? Thank you.

Yes, so I'll just comment at a high level. I mean, it's all the permits that we need. I think we're closer and in Argentina, we are in Kings Mountain. But we're early in the process in North Carolina. But Eric can talk about more details there.

These are classical studies, P.J., it’s Eric here, that you would do for any pre-feasibility work. There are - the Antofalla site is a greenfield site, and has not ever been mined before. So there are a host of different permits from environmental onwards that that would have to be achieved and those are underway and then we would progress from there. In the case of Kings Mountain, this is a brownfield site. And so much of the work has to be done. And similarly on testing -- groundwater testing, environmental, there's a lot of work we're doing also with the community. We’ve engaged them very early on and did so earlier this quarter to participate in that process. And so as Kent said, that's a little earlier on but it's also brownfield sites. So it'll have a slightly different trajectory than, say, a greenfield site like Antofalla.

Thank you.

Our next question comes from Jeff Zekauskas from JPMorgan. Please go ahead, Jeff.

Thanks very much. You have a very clear idea of the capacity expansions you wish to execute over the next five years. What's the trajectory of capital expenditures from $1.3 billion to $1.5 billion level?

Not sure -- you mean over past the next five years?

Yes, exactly right. How do you expect your capital expenditures to change over that period?

Yes, I think you're probably - we expect them to be in that range, right, over the over the next five-year period and going forward. I mean, it depends on what on opportunities. So resources, if we had additional resource that would change that profile. If we were able to acquire or identify additional resource, that could change that. But I think our baseline, which we've laid out in our Investor Day is kind of capital in that range over the next five-year period.

Great. So lithium prices have really moved up. And are there limits to what cathode manufacturers or battery manufacturers can absorb? Or do you see any ceilings, or we'll just see what the market brings?

Well, it's difficult to call what the market is going to do, so I think we have to see what the market is going to bring. And I think there are economic factors that come into play. But it - when you look at the overall cost of a vehicle, I mean, there's a lot of – there are a lot of components that go in there, lithium starts to become a little bit material, but it's still a small percentage of that overall cost. So I mean, like our view is that prices -- the market is moving, they have recently just come down a little bit, suspect that's because demand in China is off because of COVID-related issues. So it has softened recently. But we're trying to structure our contracts. We've talked about this for a while. So we move with the market. So we're not dislocated to the market in either up - either in an up market or a down market.

Okay, great. Thank you so much.

Our next question comes from David Deckelbaum from Cowen. Please go ahead, David.

Think about expansion and your growth projects in North America, you discussed accelerating some activity at Silver Peak, growing out the Kings Mountain facility and restarting the mine there and looking at, obviously, the Magnolia Brine operations. One, is there an interest? Or should we expect Albemarle to be filing any loan applications to look for some low-cost financing with any of these projects? And then my second part with that would be do you anticipate building out conversion facilities in and around the Kings Mountain, that would be sort of greater than your U.S. base resource on the upstream side?

Okay. So there were a couple of questions in there. So I think first, I mean, loans, I think we'd be interested if we can get economically buyable loans better than we can do on our own. We're definitely interested in that to help us build out the battery supply chain in North America. And we would be looking to build conversion capacity locally, our customers want local conversion -- local resource and conversion capacity. And then I think your question would be outsized conversion, vis-à-vis the local resource that we have. So we'll have to work that out over time. But the way we see it, we've got to convert the local product, but probably have to supplement local product with product coming from outside the U.S. And then we want to make sure that we as we do this, we're considering recycling as well. So we want to have not only virgin lithium coming from the resources in the United States and outside the U.S., but capacity for recycling as well. And we see that as an integrated facility that does that.

I appreciate the color on that. And then just my follow-up quickly. Maybe if you could just characterize the situation, you reiterated your outlook around volumes and obviously increased the outlook around pricing. Are you seeing any impacts, I guess, from some of the shipping woes that we hear getting into China or getting product into China? Are you anticipating that and then have you experienced little friction moving spodumene concentrate into your converters in China? And how do you see that situation kind of progressing throughout the year?

Well, I mean, we see that in all of our businesses, right? So we're finding the supply chain, as you hear in the news, and with every other business. We're finding it, but we've been able to manage through it. Today, we can't say we don't have issues, but we've managed through it. But maybe Netha or Eric, you guys could comment a little bit on specifically, what you see in I guess really around China and Spodumene in and out. So relative to China and the lithium business. Just recall that we are an exporter, as well as an importer. So a lot of the hydroxide production that we make in China goes to that market and then a chunk goes outside and surrounding Asia countries as well. And vision, as you point out we're bringing spodumene from Australia and highly support those operations. We have not -- we've experienced some customer impacts. We haven't been able, due to logistics, to hit certain time lines. But we haven't had any material impact to our revenues or to our contracts with these customers, can it comes down to just a very active supply chain team that is constantly managing various ports across the East Coast -- the Eastern seaboard of China to find the right way in and out for those products. But, there are thousands of ships sitting of the coast of China, so it’s not a small task and so we’ll manage it on a day-to-day basis. The COVID crisis and how it's being managed there in China has definitely made this challenging, and we expect to continue to have that challenge and be very -- how we manage it, but no impact material variety so far.

And I think for us in bromine, China, we are a net importer, so for us getting material in is the same for Eric, an extreme challenge. But we're also getting on the back end seeing containers return from China to allow us to load up our facilities in America. And in the Middle East. That's probably the bigger issue. And that's part of the macro supply chain challenge and container movement around the world. We've got a great logistics team here Albemarle in supply chain with a brand-new leader, and we’re excited about what they’re doing to manage this difficulty. But again, no material impact, we’ve got a great team and they're managing that very well for us.

Thanks Eric. And thanks Kent.

Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead, Vince.

Thank you. Scott, I just was wondering if you could give us a bit more color on the working capital and how it works, just given so much of the increase in guidance was price related. So it’s just a question of receivables are going to spike for period of time as these prices flow through? Or is there anything going on the inventory side as well.

Yes, Vince, I think you've nailed it. So as prices go up obviously the receivables go up, we’re generally averaging between 55 and 60 days as a total company, so you basically have two months of receivables and the impact of that. So that's a driver. The second one is on inventory rising and inflation. We’re seeing obviously our inventory costs go up as well even though the quantities are about the same, were actually a little bit lower, from what we saw last year. So those are the two drivers. We see a little bit of benefit in the payables to offset that inventory, but that's what's going on.

Okay. And just as a follow-up. You mentioned that for some contracts that might be renegotiated midyear off of 6 to variable. Do you have a rough idea of what percentage of your mix that could be or that's at least in discussion?

Yes. So if you actually look at the chart that we put in the presentation that breaks down our revenue, those fix contract makeup about 30% of our battery grade revenue. And those are the ones that are in discussions right now. So we'll see. If we’re successful, there would be additional upside to the guidance. As we move this to variable pricing.

But it’s all the 30% subset of it.

Eric, do you want provide some addition detail there.

Yes. I would -- just knowing the mix of business we have and so now I would say it is subset, we still have a double-digit percentage there, when go to zero. But it could come down from 30% if we prevail.

Okay. Thanks and I appreciate the help.

Our next question comes from Joe Jackson, from BMO Capital Markets. Please go ahead.

Hi, good morning everyone. I wanted to ask question, and it's not just you, it's obviously the business and your peers, what you thought pricing would be in margins different look only three months ago, but into February into that quarter and Q1. And suddenly, the way your contracts are working with index pricing now, it's a lot higher pricing, it's a lot better margin, the story is really different. So I want to ask what really changed. And if things could change so quickly in three months, how can you be confident pricing your base case can stay flat for the rest of the year?

Yes, so I mean, we've been talking about moving to these variable price contracts for over a year. And coming into the year, I mean, we're basically in the same position that we were at the beginning of the year. Most of the discussions that with most happened that changed our contract structure happened at the end of last year, toward the end of last year. What's changed is pricing. The indices have moved up, market has tightened. The market has gotten stronger from an EV demand standpoint and particularly in China. So that's really, I think, was the driver. Those were the first prices to move and other prices followed that. And it’s a tight market I mean the demand strong, and the supply is -- it's tight. It's a little bit an imbalance, and that's what's driven pricing. Well, it how it stays there. I mean, we have -- but there are lags on our contracts. So we feel like we understand the second quarter pricing, very good. And we don't see it dropping dramatically. That's why we were comfortable giving guidance holding what we see for the second quarter for the balance of the year. What it does going forward after that, it's difficult, it's difficult to call it the market is still tight, it's gotten a little soft, because the demand is off in China over COVID issues. Some of the EV plants were shut down, they're mostly backup now, but they are at lower rates. So demand is a little bit slower, which is caused a pause in the market and pricing has come off a little bit. It's hard to see how that comes down over time, I mean it can, but it's hard to see that happening very quickly.

Okay. If I follow up on that. So, if you are now more exposed to spot and not as much it's fixed so pricing moving around a lot more. How does that change how you manage the business? Because you can have a view right now, like you just said, but obviously that could change in a month or two. And that may change how you look at things, your risks, how you handle working capital, what level, how comfy you are with leverage, because it seems like your business now is going to be more variable with spot price of lithium, which have surged, and they're way more volatile than they were in the past. How does that change how you view the business month to month, quarter to quarter? How do you plan for it?

Yes, so our contracts, I mean, they're not all spot. So these are contracts that we have. Some are shorter term in the variable category. Some are short term with that better index to the market, the longer term contracts, we have our index to the market, but tend to have collars on them with floors and ceilings. So that takes some of that variability out. So it's an evolution of our strategy around pricing. We are more indexed to the market today than we were a year ago. Definitely. And that was by design. And I think we know but we're confident in the volume growth and then pricing will -- it will move up and down. But we have a very good cost position with the resource base that we have in our cost position. We still think that we can invest capital to grow for this business and have confidence in them.

Our next question comes from Alex Yefremov from KeyBanc. Please go ahead, Alex.

Thanks. Good morning, everyone. And congrats on renegotiating the contracts. Question on volumes. You're raising your Wodgina production goals for this year. And yet your overall volumes are about the same for this year. Could you kind of explain what's going on with your volume assumptions in lithium?

So the -- Good morning, Alex, and thanks for your words. The volumes that we have guided to our 20% 30% above last year's numbers about 88,000. That’s described to you in the chart on page 11. We had already contemplated in our guidance that some form of Wodgina 1 would be used to support that volume growth. Wodgina 2 coming on is to follow the strategy that Kent indicated of having an excess of resource capacity to conversion growth. And there's and we will look potentially there could be some possible upsides if that goes smoothly, it won't come until the second half of this year. There's some possibilities to toll or sell that as we indicated during our prepared remarks. So that would be certainly an access to the 20% 30% that was the range which is our internal production.

Okay, understood. Thanks a lot. And the second question on pricing. I mean, you indicate three to six months lag effect for half of your battery grade revenues. So, if we take second quarter, for example, your expectation for second quarter pricing, and then we assume that these indices kind of stay flat where they are today. Does that imply that third quarter price and perhaps fourth quarter price go up sequentially? Would that be right logic given these lags?

Yes, given the lags, we only can see, as Kent said, clearly out three months because of the nature of these lags. But if market prices stay where they are, yes, there's upside. Very clear, there's upside. I think we said in our guidance that has to be a material decline in market prices. And what we've seen in the past couple of weeks in China's does not represent a material decline. So there has to be much more significant decline before that would have a downward impact on our guidance.

Great, thanks a lot.

Our next question comes from Matthew DeYoe from Bank of America. Please go ahead, Matthew.

Good morning, everyone. So questions on MinRes MARBL joint venture? One, have they paid you for the 10% stake yet? Two, whom controls the decision to run Wodgina? And at what pace? Is that MinRes that you? Is that a joint decision? And then when you move to 50-50, is that going to establish after tax accounting for that business as well?

So that I trying to take that. So that they not paid us for anything. And it's a concept, and we're negotiating that at the moment. So we're operating at a 60-40 structure that we had previously. So we're under discussions, and I would say negotiations around expanding that JV which and that expansion would move it to be 50-50 at Wodgina. But that's we've got to conclude all of that. And none of that will change until we conclude the discussions and get the final document. So the counting, Scott, I'll leave that to you.

Yes, so I mean, counting. Some of this depends on how those negotiate. So with a 50-50 joint venture, there's some complex accounting rules around control that we'll have to go through and evaluate that once those agreements are there. So there's two potential options there. One is that it is a consolidated joint venture on our books with minority similar to what we do with JBC, or with no control, and it'll just run through equity income, which would then create that tax impact that you asked about. So more to come on that, all depends on how the negotiations and the final contract comes out.

That's helpful. And then what do you -- what are the assumptions for second half 2022, spodumene internal transfers? If I were looking at sizing that impact, is it still 1770? Or have you moved that up?

No, no, that's moved up. It's almost doubled from that. So I think it's Eric, do you have that.

It will double.

Will double. It's based on a formula with we've agreed to the JV has agreed to with the authorities in Australia for tax and royalty purposes. And then it's based upon a lagging basis of how spodumene prices in the market, several different indices have fared. So based on that, what you see spodumene prices rising with, certainly would be soft prices as well, that we talked about earlier, that average price is probably going on the order of double where it's been.

Yes, understood. Okay. Thank you.

Our next question comes from Christopher Parkinson from Mizuho. Please go ahead, Chris.

Hi, this is Harris fine on for Chris, thanks for taking my question. So your competitors have been discussing that there has been a noticeable step change in your customer’s willingness to enter into contracts and more of an acknowledgment that the world will be short lithium in the coming years. So I was wondering if you could give your perspective on that based on what you're seeing. And I know it's early but how what that implies for the setup for 2023 pricing, is it reasonable to expect that you would be able to maintain these levels?

So, Harris this is Eric, I'll start and maybe others will add. So the market there is certainly a very big concern about security supply, with the rapid commitment -- with the significant commitment that automotive manufacturers are making towards EVs and the excitement that brings with it. There's a concern as well that that the whether the industry can spool up quickly enough to meet that demand. And in one regard, that might be why the spot price is so high, it's just a fundamental concern in that regard. And that's leading to long term partnership discussions, unfortunately, that falls squarely in a strategy we've had for years now, which is picking the right partners partnering with them long-term leveraging our world class resources, and our ability to execute well, to give them comfort that we're the right partner for them to ease that concern around security of supply. Price is -- as we've discussed at length in this call is a function of what happens with the market indices, for a large measure of our revenue currently 6% of our battery revenues are going to be impacted by that it is, and that's going to be what the market does. So there will be structures we take on with these sorts of partners. As Ken earlier said, we'll probably be index based and have some coloring on either side of them. And a long term commitment from these customers to buy in for us to supply where that price is, is going to be a function of the market. So hard to call that right now.

Got it. And piggybacking off that, in the past, you've been looking at sort of a 40% long-term EBITDA margin bogey for lithium and 1Q looks like a little bit of an anomaly. But given the current price setup that you're seeing, is there any meaningful change to your long-term, normalized margin outlook, it's a bit higher in 2022. And if you could also talk about helping us come up with a framework for quantifying how startup costs are going to play into that over the next few years, that would be really helpful?

Yes, so I would say that our long-term view as we laid out last year in our investor day was in the mid-40s for the lithium business at mid-cycle pricing. So through the cycle. And I would say that our view really hasn't changed at this point in time, we'll continue to evaluate that. And just as we need to, as we better understand the long term pricing outlooks. Of course, as you mentioned, our plant startups do have an impact on that. It's bigger today, because we're doubling our capacity versus as you go forward in time, the next increment is going to be a smaller and smaller percentage, and eventually just be part of just part of our normal operating activities.

Our next question comes from Arun Viswanathan from RBC Capital Markets, please go ahead.

I mean, first off, I guess, just wanted to go back to the pricing discussion. So, we have had some majors announced, some new capacity announcements, I think, in thing and some, some others, as you know, and that would kind of potentially signal some confidence that we are in a new price regime. You've also taken up, your guidance for the full year. I'm just curious what you think, the new level of, say peak to trough pricing, and lithium is, as you move into '23. I mean, do you think you can build off of this space that you're at right now?

So we're not going to call lithium pricing going forward. I mean, part of -- what we've done is we've structured our contract. So we move with the market, and we've given ourselves a little bit of stability, that's been part of our plan for some time. And it gives our customers visibility of what the price is relative to the market mean, they have the same visibility going forward as we do and as you do, so it's difficult for us to say where it goes in '23, we think the market is tight. When we look at the demand from EVs and demand on lithium, and what we see as capacity coming on the market is tight for years. So, for at least through our planning period, which I would call it five years. So we see it being pretty tight. Now there'll be periods where there's some oversupply, but the growth in the market, it catches up very quickly. So we think the market is tight, but we're not going to call lithium prices for '23.

Understood. And then I guess, we haven't really asked about bromine yet. So maybe I'll just ask quickly there. Maybe you can just provide a couple more details on your thoughts there. Do you expect continued price upward momentum there and what's the outlook, I guess from a demand standpoint?

Yes, Arun, in terms of pricing, I think we should see pretty stable pricing. We're pretty fortunate that the applications and digitalization, electrification continue to grow, and that those applications are growing slightly faster than supply can come onto the market. So similar to what we saw in our investor day, last fall, we expect this market to be fundamentally under supplied for the next five years or our planning period. So and we're adding capacity. So we expect the pricing to stay relatively strong for this foreseeable future.

Next question is from Ben Kallo from Baird, please go ahead.

Good morning, to all. Just two questions. First, hydroxide versus carbonate? And how do you decide on where to make the investment on the two, and then geopolitical risk, just as you invested in countries that there was a headline out yesterday about Mexico nationalizing their lithium resource, but as you look to Argentina making that investment in Chile, we get a lot of questions about that. So how do you think about that going forward? And thanks, guys.

Ben, this is Eric, I can take the hydroxide and myself or Kent can address the geopolitical response. So first, on hydroxide versus carbonate. The prior question was about the trend towards long-term partnerships and security supply. We one of the benefits of the customer partnership approach is to leverage that their commitment to us in making commitment firmly to the product form that they wish it, there's also and this does relate to the geopolitical risk side of things, and that there's also a discussion around where they want it. And increasingly a concern and a desire to have localization of supply. So we leveraged the commitments we're trying to get in these contracts, always got some risk to narrow down those two issues, the product risk and the regional risk for the two, as an added comment we currently are seeing that maybe carbonate is or LSP, chemistries are about maybe 20% 25% of the market. That's our current view, we continue to monitor that carefully. Kent do you want to comment just on how we think about risk?

Yes, I would say I mean, important for us, given the locations where [Technical Difficulty] we look at it kind of at a macro level, and by country, so and we look at it for particularly kind of we get deeper and deeper as we make a new investment. But we monitor that. So a lot happening in Chile, as you know, we talked about on these calls before Argentina, as we make investments there, we'll have to make sure that we're looking at those risks and monitoring that Australia less of an issue, China's another area that we have to focus on, and make sure we have our risk assessments but we monitor those, we try and combine it with active government relations on making sure that we're doing the right thing in the country. So we're seeing as a good actor, and that we're bringing value to them as well, that others can't necessarily bring. So that's a big part of how we feel that we mitigate the risk and some of those geographies.

Our next question is from Colin Rusch from Oppenheimer. Please go ahead, Colin.

Thanks so much guys. Can you talk a little bit about the potential for incremental customer deposits or customer funded CapEx? You guys are spending a ton of money to grow capacity, and then just worrying about some of the alternative strategies for finance?

Yes, Colin I think it's a good question. I think, given the environment that we're in, and the concern around supply from our customers, we're exploring all sorts of options, partnership type of options, like Eric talked about pre payments, there's a variety of different things there. I think the key for us is to ensure that that those types of agreements are giving us incremental return, versus what we could do on our own. So clearly, our strong balance sheet, strong support from investors give us plenty of capacity to build and do it on our own. But if we can get incremental returns, we'll take a look at it.

Okay, and then just given the expertise that you guys have around cathode materials and formulation, I'm wondering about your willingness are interested in additional vertical integration. Obviously, you don't want to compete with your customers, but it seems like you guys have enough expertise that you could do some real work in that space?

Is that a capital question or just a CapEx question?

Yes. CapEx, I wanted to hear vertical integration there.

Yes. So I mean, look, we look at the different options, but we're from, we look at it from a material standpoint, our interest in batteries and cathodes is to make sure that we're producing and developing the right chemistry that go into our customer’s processes. So we're not looking to be in the cathode business, but we're looking to be an excellent supplier to those cathode makers and the OEMs that have a vested interest in the battery and the cathode technology.

Yes, and I just expand Colin part of note, part of doing that as being able to understand that application very well, but not integrate forward into it. And as I would also say, though, that as we look at other advanced forms of lithium, we'll look at the -- again, question exactly how we want to play and still be material player, but what material are we supplying? And so we're looking at, as you look at solid state chemistries, there's a variety different ways we can play in that area. And we're doing a lot of work currently, with partners and customers in that area to determine the future.

That's it for all. Thanks, guys.

That's all the time we have for today's Q&A session. I'm now going to hand you back to Kent Master for any final remarks. Please go ahead.

All right. Thank you, Terrence. And thank you all again for your participation on our call today. Our success in 2021 combined with the momentum we are experiencing in '22 strongly positions us for profitable growth. I'm confident in our team's ability to drive value for all of our stakeholders by accelerating our growth in a sustainable way and to lead by example. Thank you and thanks for joining us.

This conclude today’s call. Thank you for joining. You may now disconnect your lines.